It's The Moment Of Truth For The US Economy

2014 was supposed to be the year the U.S. economy "broke out" and
achieved growth at a higher rate than we've seen since the crisis
ended.

Instead, it's been the opposite. It looks like Q1 GDP, after all
the revisions are in, will be decidedly negative. Goldman is
currently tracking Q1 GDP at -0.7%!

Of course, the weather was a well-known factor during the first
few months of the year, and other data hasn't been quite as bad.
So the negative GDP print doesn't actually tell the story.

Nonetheless, at some point there will be no more excuses.

In a note to clients, Goldman's top economist Jan Hatzius says
it's now showtime for the U.S. economy. This paragraph really
captures everything that's going on nicely. In addition to the
cyclical short-term factors, the question of whether the U.S. is
incapable of above-trend growth is something that's
increasingly in vogue among mainstream economists. The bolded
lines are ours:

The first-quarter disappointment has resonated among economists
and market participants for two reasons. First, it brings to mind
the 2011 precedent, and more broadly the repeated downside
surprises on growth in recent years. Second, it comes in
the wake of the debate around “secular stagnation” that was
kicked off by the speech by Lawrence Summers at the November 2013
IMF research conference. If the US economy cannot
accelerate to a clearly above-trend pace even after the end of
the private and public sector retrenchment at a time when
monetary policy and financial conditions still look very
supportive, then it is certainly appropriate to ask whether the
forces holding the economy back are deeper and more structural in
nature. In that sense, it is really “showtime for the
recovery”, the title of our 2014 outlook article published last
November.

All the pieces are in place for the U.S. The fiscal drag is
fading. Household balance sheets have improved. State and local
bloodletting is coming to an end. If not now, when?